## Facts

- The Town of Hempstead condemned and acquired title to property on and adjacent to a warehouse site in 1967, including access-related areas reflected in public records.
- Bass Rock Holding, Inc., the prior owner, became the subject of foreclosure proceedings; Gerald Tucker became involved and helped form L. Smirlock Realty Corp. to acquire the warehouse.
- Town counsel allegedly informed Tucker by phone that a portion of the property had been condemned and should be excluded from foreclosure; Tucker allegedly stated he was not interested in that parcel.
- Smirlock’s purchase contract allocated to Smirlock the condemnation award payable by the Town.
- Title Guarantee issued a title insurance policy in connection with Smirlock’s acquisition but failed to discover that key access roads had been condemned because it did not conduct a full search of the relevant public records.
- After Smirlock improved and leased the warehouse, the condemnation of the access routes was discovered, materially impairing access and the property’s usefulness; the tenant left and the property returned to foreclosure.
- Smirlock sued Title Guarantee for covered loss due to the undisclosed condemnation; Title Guarantee asserted that the policy was void under a standard misrepresentation/concealment clause because Smirlock had prior knowledge and did not disclose it.

## Issues

1. Whether a title insurance policy is void under a standard misrepresentation clause when the insured fails to disclose a material fact that was a matter of public record at issuance.
2. Whether a title insurer may avoid liability for a title defect it could have discovered through a proper search of public records by showing the insured had some prior awareness of the defect.

## Decision

- The Court of Appeals reversed the rulings for the insurer and held for Smirlock.
- The court held the policy was not voided by the insured’s nondisclosure of a material fact that was readily ascertainable from public records.
- The insurer remained liable for the covered defect because the condemnation was discoverable through the type of title search the insurer was obligated to perform.
- In a later appeal limited to interest, the court modified the interest start date to run from the date Smirlock acquired the defective title and the policy issued (May 14, 1969), rather than a later date.

## Legal Principles

- Title insurers bear primary responsibility for discovering defects and encumbrances shown by public records in the regular course of a competent title search.
- A standard misrepresentation or concealment clause is not applied to shift to the insured the burden of disclosing public-record title defects the insurer was retained to find.
- For purposes of voiding a title policy based on misrepresentation, nondisclosure is most relevant when the concealed fact is outside the public record or uniquely within the insured’s knowledge such that the insurer justifiably relies on the insured’s disclosure.
- An insurer’s failure to conduct an adequate public-record search is not excused by the insured’s silence about information the insurer could and should have located from the records.

## Conclusion

The court held that a title insurer could not avoid coverage under a misrepresentation clause based solely on the insured’s nondisclosure of a condemnation reflected in public records, because the insurer had the duty to discover such defects through its own title search and remained liable for the resulting loss.


L. Smirlock Realty Corp. v. Title Guarantee Co., 52 N.Y.2d 179, 418 N.E.2d 650 (N.Y. 1981)